The Jet Set

So, El Presidente has decided it’s time to pile on those vile corporate jet owners.

Yawn. Not like it’s the first time or something.

I have a personal interest in this, being a well-heeled corporate jet owner middle-class slob who happens to work in the airplane business.

So what if a few millionaires don’t get a tax deduction for their fancy private jets? It’s just another loophole they shouldn’t have anyway. Big fat hairy deal, right?

Wrong.

First of all, it’s not really a loophole any more than your mortgage interest deduction is a loophole. All it does is let bizjet buyers deduct the airplane’s loss in value sooner rather than later. It takes a bit of the sting out of laying down that kind of money. And believe me, bizjets have been depreciating at quite a clip lately.

Secondly, the revenue would amount to next to nothing. Chicken feed. Square-root of a donut hole. There are probably rounding errors in this year’s budget that amount to more money.

But it does allow El Presidente to paint all rich people as Scrooge McDuck or the Monopoly guy. Which is what he really wants — facts don’t matter when it’s so much easier to argue from emotion. And he’s counting on that working for most people. Hey, it got him elected so why not?

Color me unimpressed. If you’re interested in truth, here are some nuggets for your noggin:

Mr. Monopoly Guy decides he wants and/or needs a corporate jet for his business and/or personal use. Call it 50/50 (though most really are used for business…and if they’re not, so what? It’s not your money).

Obviously, somebody has to build the jet. That means jobs in Wichita, Savannah, or any number of other places. These are engineers, machinists, aircraft mechanics…highly skilled people in generally good-paying jobs.

He’s also got to hire at least a couple of pilots to fly the thing. That’s two more jobs.

Oh, and these things usually don’t come out of the factory ready to fly. Paint and interior often involves hiring another vendor. More jobs.

Even a brand-new jet requires maintenance, including annual inspections which can get quite expensive. That means he’s either got to hire his own staff or farm it out to yet another vendor. Either way, somebody’s getting paid to work that bird on a regular basis.

The jet needs fuel to go anywhere, and Jet-A ain’t cheap. Who’s gonna pump it? A whole network of airplane service stations called FBO’s (Fixed Base Operators), that’s who. And they employ large staffs of people, all over the country, who are there to take care of Mr. Monopoly Guy’s airplane wherever it may end up.

Suppose he wants to take the jet to Europe? Leaving the country is kind of a big deal and requires a lot of prior coordination with multiple agencies, which is typically not left up to the pilots. Like FBO’s, there are specialized companies full of highly-skilled people who do that stuff for a living.

All of these people get paid, in real money, and use it however they see fit. Just like Mr. Monopoly Guy, albeit on a smaller scale. Maybe Joe Mechanic buys a jetski instead of a bizjet. But take away their customers, and that’s a lot of people out of work who could’ve been spending their income on other pursuits. Trickle-down is real, and that’s how it works.

But these guys are loaded, right? They don’t really care if they lose a few hundred grand in tax deductions…maybe. Changing the rules in the middle of the game tends to make people spend cautiously.

This goes beyond just owners of fancy airplanes, it affects just about any other business endeavor where people choose to spend money. That means all of ’em.

Let’s examine El Presidente’s other strawman example, “best-selling authors”. I also take this one personally, only because I aspire to become one.

Unless your name is Clancy or Rowling and you’ve become your own franchise, here’s how writers make money: after months of sweating blood over your Great American Novel, your agent finally sells it to a publisher. That publisher pays an advance, which is payment against expected sales. If they’re confident it’ll sell big, your advance may be well into six figures (not usually the case, but I can dream).

That advance may be the only money the author ever sees (unless he does the indie e-book thing and keeps 70% of the monthly gross – yay Amazon!). If the book ends up selling more than what the advance was worth, only then will the author begin getting royalty payments. That can easily take over a year, so you’d better make that advance last a while.

So “rich” varies. A funny thing about rich people is they often have irregular incomes, so if they’re smart, they’re quite careful in how they allocate it. Actor Biff Studley might make $10 million this year and nothing the next. Same goes for Chas McHarvard, the hedge fund manager. At that level, it’s unpredictable. How else do you think so many celebrities end up flat broke and doing reality shows on VH1?

Nobody was ever offered a job by a poor man. If they were, it probably didn’t last very long.